Telecoms fight for the right to party with iPhone 3G

Apple's iPhone 3G is exciting more than just tech-savvy consumers wanting to play with the latest gadget. Worldwide, mobile service providers are fighting tooth and nail for the right to sell the new iPhone because of its ability to attract new customers and sell them on data service plans, which providers have previously found to be a difficult sell.

Tough times for a rough market

According to Strategy Analytics, 1.12 billion mobile phones were sold last year, and 1.24 billion are expected to be sold this year. Forecasted growth of phones in general has slowed slightly due to difficult economic conditions worldwide. Intense competition between phone makers has also taken its toll on the weakest handset manufacturers.

Nokia has held onto the lead with its 38.8% share of the world's phonesets in 2007, while Samsung came in at second place with a 14.3% share. A lack of compelling new phones models from third place Motorola caused the company to slip dramatically down to a 14.1% share; it was hit particularly hard in the fourth quarter. Fourth place Sony Ericsson has also slipped downward to 9.2%. LG rounded out fifth place with a 7.2% share.

Apple's share of all phones sold worldwide last year was just 0.6%, but that represents more than half of what Steve Jobs originally outlined as Apple's goal for the end of 2008: a 1% share of the entire market. Apple's share of all phones sold is a misleading metric however, because the demand for more sophisticated phone units is rapidly outpacing the growth of mobile phones in general

Eyes on where the puck will be

While Strategy Analytics has pegged the overall phone market cooling from 12% growth in 2007 to just 10% expansion in 2008, smartphone sales are expected to continue their rapid ascent, with Gartner forecasting growth of 42% this year.

Incidentally, those growth numbers parallel the difference in growth between Apple's white hot Mac sales and the tepid PC market in general. Just as Apple has left the high volume but low profit commodity PC market for Dell and HP to fight over, it has similarly targeted the smartphone market exclusively, leaving mass market, lower profit "feature phone" sales to Nokia, Samsung, Motorola, Sony Ericsson, and LG.

In the US market, the iPhone rapidly carved out a 27% share of smartphone sales within its first few months. Worldwide, Apple's launch of the iPhone 3G has promised to further muscle into the high growth smartphone market, with providers fighting over regional rights to sell the new phone.

Fighting for exclusive rights

Last year, AT&T signed a deal with Apple for exclusive rights to sell the iPhone in the US market through 2009. On Thursday, USATODAY reported that the company extended its contract with Apple for an additional year through 2010, an endorsement of the iPhone's impact on AT&T's growth and profits.

Similar exclusive deals were signed in Europe. For example, Telefónica's O2 is believed to hold an exclusive contract on iPhone sales in the UK through 2012, according to a report by The Guardian.

These exclusive deals are actually being sought out by the telecoms themselves; Apple is understood to have an escape clause written into its contracts which will allow it to terminate the deals if "it does not think the phone is being marketed successfully," according to the Guardian.

The reason that mobile providers are fighting for exclusive access to the iPhone (or trying to buck against exclusive access by rivals) is that the iPhone is a hot seller that has the power to pull subscribers from other companies. Now that most users already have a phone, the goal has shifted toward nabbing customers from rivals rather than trying to recruit entirely new users.

The race toward smartphones

Further, the holy grail of the mobile industry is to sell data service on top of basic voice access, since this results in double the revenue for the same number of subscribers. Mobile providers have had a hard time marketing their data services, but the simplicity of the iPhone's network-savvy Maps, Mail and the mobile Safari web browser sells data plans hand over fist.

Simpler feature phones from Nokia, Samsung and others, which make up the majority of thier sales, don't sell these profitable data plans so mobile providers are subsequently less excited about selling them to consumers. Since most phones are sold by the mobile providers, this has a huge impact on where phone sales are headed.

Stealing rival provider's feature phone subscribers and upgrading them to an iPhone with a data plan is the ultimate win, as it erodes the competition while substantially boosting profits. In order to make this happen, providers are willing to heavily subsidize the iPhone 3G, paying Apple upfront in order drop the hardware entry price for consumers. That in turn erases the remaining allure of cheaper feature phones, pushing consumers toward smartphones even more rapidly.

Daniel Dilger from roughlydrafted.com, how many aliases do you have here on apple insider? Prince Mclean, Aidan Malley, how many others? Why don't you just use your real name and not try to fool the readers in getting a varied viewpoint on issues? Your writing style is unmistakable...

Daniel Dilger from roughlydrafted.com, how many aliases do you have here on apple insider? Prince Mclean, Aidan Malley, how many others? Why don't you just use your real name and not try to fool the readers in getting a varied viewpoint on issues? Your writing style is unmistakable...

I know. I feel it is sort of amateurish. Always trying to write the big-shot "journalist" mega-article when in reality it is just a regurgitation of old Apple-related information found somewhere else, with nothing new to show: just cheesy phrases and no meat, no new stuff. Oh well.

I guess some may find his stuff enlightening and superb or whatever. Not me though.

Daniel Dilger from roughlydrafted.com, how many aliases do you have here on apple insider? Prince Mclean, Aidan Malley, how many others? Why don't you just use your real name and not try to fool the readers in getting a varied viewpoint on issues? Your writing style is unmistakable...

Hi Daniel,

Love your work. Ignore the nasty guy above. Although your style is similar, it's clear that you're on your best 'no snarky' behavior over here, hence 'Prince McLean'! (Some people don't have a sense of humor.)

Anyhoo, you're in the Geeky Apple Hall of Fame as far as I'm concerned.

Keep on writing your ass off! I hope you've invested in Apple, because I feel 1000s of your readers are making very serious money having understood Apple's technical excellence, strengths, and dominance through your reports.

Love your work. Ignore the nasty guy above. Although your style is similar, it's clear that you're on your best 'no snarky' behavior over here, hence 'Prince McLean'! (Some people don't have a sense of humor.)

Anyhoo, you're in the Geeky Apple Hall of Fame as far as I'm concerned.

Keep on writing your ass off! I hope you've invested in Apple, because I feel 1000s of your readers are making very serious money having understood Apple's technical excellence, strengths, and dominance through your reports.

The problem with Malaysia is, Malaysian usually change their provider depending on how economic is their plan. It will be interesting which provider will get exclusive rights. I hope its Maxis .

Hi wheelhot, can you believe of the 70 countries, Malaysia is not even on that bloody list.

Singapore will be first with the iPhone 3G in South East Asia alongside the Philippines. As Singapore is the prime Apple, Inc. office in charge of India and South East Asia, that means Singapore will get it first before the Philippines, in all likelyhood.

So whether it is Maxis, Digi or Celcom, we'll see. Hopefully Maxis will do it because it is best suited with their clients and Blackberry. Digi is definitely out IMO because they have no feasible 3G offering right now.

Warning: x-SIM, y-SIM etc kind of solutions for unlocking iPhone 3G, let me know if there is any testing done on it. Probably there will be huge number of iPhone 3Gs flooding South East Asia market now from Hong Kong (because it is unlocked) and also from Singapore (it will probably be locked).

In playing with my iPhone 3G White 16GB, at first I was kinda annoyed about it being locked so I just fooled around with the Wifi.

Then I got a bit of fun with some SIM hacks for a few hours while it worked.

And you know what? Sure, I need mobile and SMS.

But DATA is the key. I agree. GPS and DATA. GPS is very, very powerful.

The iPhone 3G applications and platform has enormous potential.

Again, DATA is the key.

Two main service provider industries will thrive: reliable, standard-subscription based WiFI that covers the city. Like Cloud in the UK.

Next, the telco itself, I agree, because they sell you data plans.

Fighting over text and call minutes is yesterday's news and is an absolute slugfest.

But like most of us, give us a frickin' unlocked iPhone 3G, give us a bloody reasonable 3G prepaid plan on top of contract options, and for the icing on the cake good WiFi coverage, and Boom! That's successful iPhone 3G and Apple, Inc. operations and happy telcos in a geographic area.

Throw in good access to Mac resellers and support, and there you have it. The three legs hopping successfully.

Only one problem: supply constraints means that the serviceable market is contained by supply of products since these products are highly difficult and uneconomical to be closely copied or imitated.

I wonder when will Malaysia get iPhone?
The problem with Malaysia is, Malaysian usually change their provider depending on how economic is their plan. It will be interesting which provider will get exclusive rights. I hope its Maxis .

Bro tell me now in KL how much they try to sell iPhone 3G? Locked version how much? Unlock version (probably from Hong Kong) how much? From Low Yat or other place as well?

1. Telcos lock down Apple iPhone 3G.
2. By September full Dev Team iPhone 3G unlock is most likely.

NOW.

WHO ARE THE BEST MVNOs (sorry head is flooding right now with ideas) that provide good 3G Data Service ????????
Who are the best telcos that provide good pay-as-you-go (credit checks are too inconvenient for a lot of people) 3G Data Service ???????
Who combines these with good city-wide, nation-wide, region-wide (Euro etc) alliances of WiFi provision and simple, fast, reliable WiFi?

This is the key on the telco-data side of the iPhone 3G.
The other side is the grey-market/ unlocking industry.
The next side is the hardware selling itself, which on a value-driven perspective is not really there unless you as a reseller have value-"added" or value-"creating" services.
The fourth side is the App Store. Which has very high value-creation aspects but the coding and good developer resources are increasing but limited. Unless you can start to outsource iPhone 2.0 development to India or something like that. (Ding! another idea)
Following the above it is outsourcing iPhone 2.0 development.